INTERVIEW - Thai PM says early 2011 election possible

Thailand's Prime Minister Abhisit Vejjajiva speaks during an interview with Reuters on the sidelines of the World Economic Forum on East Asia in Ho Chi Minh City June 6, 2010.

Reuters/Kham

HO CHI MINH CITY, Vietnam (Reuters) - Thai Prime Minsiter Abhisit Vejjajiva said on Sunday a state of emergency would remain in place despite a reduced unrest but that an election was possible early next year.

Abhisit also told Reuters in an interview that economic growth in the second quarter could exceed 6 percent and full-year growth could be close to that level. He expected no rush by the central bank to raise rates as that would depend on recovery and inflation.

The Oxford-trained economist was speaking in Vietnam's commercial hub at a World Economic Forum event, which he said he decided to attend just a couple of days ago.

Emergency measures were imposed in Bangkok on April 7 and expanded to 23 provinces during the worst political crisis in modern Thai history as "red shirt" anti-government protests descended into bloody clashes with troops and arson attacks.

The decree gives the army sweeping powers, allowing authorities to suspend certain civil liberties, ban public gatherings of more than five people and stop media from reporting news that "causes panic".

"I think people understand that this is needed to make sure that we can curb some of the remaining activities as far as those who want to use violent means are concerned," Abhisit said on the sidelines of the meeting.

Things were calm, he said, but "feelings could run high".

"What we're waiting for now is to make sure that everything's in place, the police, the governors who'll be the ones to tell us that they are confident to deal with the situation without added special power granted by the state of emergency."

An early election, a key demand of the protesters, could go some way towards fostering reconciliation after the violence of past months. Abhisit's term ends in 2012 and he must call an election by the end of next year.

Asked if holding elections early next year was possible, Abhisit replied: "It is possible."

"If we pursue the reconciliation plan, if we get good cooperation, especially from people in the opposition, I think we could look at elections sooner rather than later," he said.

The mostly poor rural and urban protesters, broadly allied with ousted prime minister Thaksin Shinawatra, blame authorities for the violence during which 89 people were killed and more than 1,800 wounded.

Protesters, camped out in Bangkok's main commercial district for six weeks and in the city's old quarter for three weeks, had demanded an early vote, saying Abhisit had no popular mandate and had come to power illegitimately in a parliamentary vote.

On the economy, Abhisit said 12 percent gross domestic product growth in the first quarter had been "very impressive". Forecasts had been cut back, but he hoped to achieve 6 percent for 2010, exceeding a state planning agency projection of 3.5-4.5 percent.

Interest rates had been kept at a record low of 1.25 percent since April 2009 to help revive the economy and any central bank move to raise them, he said, would depend on annual inflation, which picked up to 3.5 percent in May from April's 3.0 percent.

"I don't think they will be in a rush to raise interest rates, but obviously that will depend on how strong a recovery we see and how much upward pressure there is on inflation," he said.

(Editing by Ron Popeski and Noah Barkin)

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